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November 3, 2013

Sticker shock often follows health insurance cancellation

MIAMI — Dean Griffin liked the health insurance he purchased for himself and his wife three years ago and thought he'd be able to keep the plan even after the federal Affordable Care Act took effect.

But the 64-year-old recently received a letter notifying him the plan was being canceled because it didn't cover certain benefits required under the law.

The Griffins, who live near Philadelphia on the Delaware border, pay $770 monthly for their soon-to-be-terminated health care plan with a $2,500 deductible. The cheapest plan they found on their state insurance exchange was a so-called bronze plan charging a $1,275 monthly premium with deductibles totaling $12,700. It covers only providers in Pennsylvania, so the couple wouldn't be able to see the doctors in Delaware whom they've used for more than a decade.

"We're buying insurance that we will never use and can't possibly ever benefit from. We're basically passing on a benefit to other people who are not otherwise able to buy basic insurance," said Griffin, who is retired from running an information technology company.

The Griffins are among millions of people nationwide who buy individual insurance policies and are receiving notices that those policies are being discontinued because they don't meet the higher benefit requirements of the new law.

They can buy different policies directly from insurers for 2014 or sign up for plans on state insurance exchanges. While lower-income people could see lower costs because of government subsidies, many in the middle class may get rude awakenings when they access the websites and realize they'll have to pay significantly more.

Those not eligible for subsidies generally receive more comprehensive coverage than they had under their soon-to-be-canceled policies, but they'll have to pay a lot more.

Because of the higher cost, the Griffins are considering paying the federal penalty — about $100 or 1 percent of income next year — rather than buying health insurance. They say they are healthy and don't typically run up large health care costs. Dean Griffin said that will be cheaper because it's unlikely they will get past the nearly $13,000 deductible for the coverage to kick in.

Individual health insurance policies are being canceled because the Affordable Care Act requires plans to cover certain benefits, such as maternity care, hospital visits and mental illness. The law also caps annual out-of-pocket costs consumers will pay each year.

In the past, consumers could get relatively inexpensive, bare-bones coverage, but those plans will no longer be available. Many consumers are frustrated by what they call forced upgrades as they're pushed into plans with coverage options they don't necessarily want.

Ken Davis, who manages a fast food restaurant in Austin, Texas, is recovering from sticker shock after the small-business policy offered by his employer was canceled for the same reasons individual policies are being discontinued.

His company pays about $100 monthly for his basic health plan. He said he'll now have to pay $600 monthly for a mid-tier silver plan on the state exchange. The family policy also covers his 8-year-old son. Even though the federal government is contributing a $500 subsidy, he said the $600 he's left to pay is too high. He's considering the penalty.

"I feel like they're forcing me to do something that I don't want to do or need to do," Davis, 40, said.

Owners of canceled policies have a few options. They can stay in the same plan for the same price for one more year if they have one of the few plans that were grandfathered in. They can buy a similar plan with upgraded benefits that meets the new standards — likely at a significant cost increase. Or, if they make less than $45,960 for a single adult or $94,200 for a family of four, they may qualify for subsidies.

Just because a policy doesn't comply with the law doesn't mean consumers will get cancellation letters. They may get notices saying existing policies are being amended with new benefits and will come with higher premiums. Some states, including Virginia and Kentucky, required insurers to cancel old policies and start from scratch instead of beefing up existing ones.

It's unclear how many individual plans are being canceled — no one agency keeps track. But it's likely in the millions. Insurance industry experts estimate that about 14 million people, or 5 percent of the total market for health care coverage, buy individual policies. Most people get coverage through jobs and aren't affected.

Many states require insurers to give consumers 90 days' notice before canceling plans. That means another round of cancellation letters will go out in March and again in May.

Experts haven't been able to predict how many will pay more or less under the new, upgraded plans. An older policyholder with a pre-existing condition may find that premiums go down, and some will qualify for subsidies.

In California, about 900,000 people are expected to lose existing plans, but about a third will be eligible for subsidies through the state exchange, said Anne Gonzalez, a spokeswoman for the exchange, called Covered California. Most canceled plans provided bare-bones coverage, she said.

"They basically had plans that had gaping holes in the coverage. They would be surprised when they get to the emergency room or the doctor's office, some of them didn't have drug coverage or preventive care," Gonzalez said.

About 330,000 Floridians received cancellation notices from the state's largest insurer, Florida Blue. About 30,000 have plans that were grandfathered in. Florida insurance officials said they're not tracking the number of canceled policies related to the new law.

National numbers are similar: 130,000 cancellations in Kentucky, 140,000 in Minnesota and as many as 400,000 in Georgia, according to officials in those states.

Cigna has sent thousands of cancellation letters to U.S. policyholders but stressed that 99 percent have the option of renewing their 2013 policy for one more year, company spokesman Joe Mondy said.

Cancellation letters are being sent only to individuals and families who purchase their own insurance. However, most policyholders in the individual market will receive some notice that their coverage will change, said Dan Mendelson, president of the market analysis firm Avalere Health.

The cancellations run counter to one of President Barack Obama's promises about his health care overhaul: "If you like your health care plan, you'll be able to keep your health care plan."

Philip Johnson, 47, of Boise, Idaho, was shocked when his cancellation notice arrived last month. The gift-shop owner said he'd spent years arranging doctors covered by his insurer for him, his wife and their two college-age students.

After browsing the state exchange, he said he thinks he'll end up paying lower premiums but higher deductibles. He said the website didn't answer many of his questions, such as which doctors take which plans.

"I was furious because I spent a lot of time and picked a plan that all my doctors accepted," Johnson said. "Now I don't know what doctors are going to take what. No one mentioned that for the last three years when they talked about how this was going to work."

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